The Pakistan Rupee is anticipated to maintain its stability against the US Dollar in the week starting from April 15, 2024, owing to the impending talks for a new loan program with the International Monetary Fund (IMF).
Despite the country’s scheduled repayment of $1 billion in international bonds, market analysts express confidence in the rupee’s stability.
The stability is largely credited to the expected inflow from the IMF’s final tranche under the bailout program, which is due within the month. This anticipated inflow is poised to balance out the outflow from the eurobond payments, thereby sustaining the rupee’s stability in the near term.
Market sentiment leans towards a stable rupee in the immediate future, with the upcoming IMF tranche viewed as a significant buffer against the impact of the bond repayment. The week saw two trading sessions for the rupee, with the local unit closing at 277.95 against the dollar on Monday and 277.94 on Tuesday. Markets remained closed from Wednesday to Friday for public holidays on account of Eid-ul-Fitr.
The recent dollar bond repayments made by Pakistan’s central bank on Friday are expected to exert pressure on the foreign exchange reserves. However, this pressure is anticipated to be alleviated by the expected final installment from the IMF by the end of April.
Traders predict that due to the planned nature of the payments and optimism surrounding the new IMF loan program, the rupee is unlikely to witness significant fluctuations. Factors such as weak dollar demand from importers, improved dollar liquidity from higher remittances, and dollar sales by exporters contribute to the stability forecasted for the rupee over the next week.
IMF Chief Kristalina Georgieva confirmed Pakistan’s pursuit of a potential fresh bailout package following the expiration of the SBA. Pakistan and the IMF recently reached a staff-level agreement on the second and final review of the SBA, which, upon clearance by the IMF board, will release approximately $1.1 billion to Pakistan this month. The IMF board is expected to review the matter in late April.
As the anticipated $1.1 billion IMF tranche is expected in April, the State Bank of Pakistan’s foreign exchange reserves are not projected to be significantly impacted. Positive sentiments among investors stem from optimism fueled by increased remittances and a financial package from Saudi Arabia for Pakistan.
Pakistan and Saudi Arabia have mutually agreed to expedite the implementation of the first phase of a $5 billion package. This package includes an increase in Saudi deposits in the central bank and investments in oil refineries and the Reko Diq project. The timely execution of these investment projects now rests with the government.
The month of Ramadan and Eid holidays contributed to a significant surge in remittances for March, surpassing the $3 billion mark. This robust figure has the potential to result in a current account surplus for the month, further buoying investor confidence.
The outlook for the Pakistan Rupee remains stable in the upcoming week, supported by anticipated inflows from the IMF, increased remittances, and positive investor sentiment driven by financial assistance agreements.
